Evidence of meeting #114 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was federal.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Barbara Orser  Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
Allan Riding  Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

11 a.m.

Conservative

The Chair Conservative Tom Lukiwski

Colleagues, if we could get everyone to the table, we're not quite here in total. Mr. McCauley just sent me a note that he's on his way. I'm sure Mr. Whalen is going to be here shortly. We're without a full complement, but we will still proceed.

Welcome to both Professor Orser and Professor Riding. Thank you for being here to assist us in discussing and analyzing small and medium-sized enterprises in the federal procurement system.

Colleagues, after we finish a one-hour panel with both Professor Orser and Professor Riding, we'll go in camera for about 15 minutes to do some committee business to try to clean up a few loose ends before we adjourn, this being the last meeting of the year.

Professor Orser, I understand you have a brief opening statement. Please proceed.

11 a.m.

Dr. Barbara Orser Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Good morning. Season's greetings. Thank you for giving me the opportunity to meet with the committee and talk to you about Telfer research focusing on the engagement of SMEs in federal procurement.

As noted, my name is Barb Orser. I'm a full professor at the Telfer school of management, University of Ottawa. My research focuses on enterprise growth, and specifically SME procurement, financial literacy, access to capital, and feminist entrepreneurship policy.

This morning I will highlight findings drawn from two studies that I hope will inform the committee. The first study profiles Canadian federal supplier SMEs, research conducted in collaboration with Dr. Quang Duong and Jérôme Catimel of PSPC's business analytics services directorate, and Dr. Allan Riding, who has joined me this morning. This is a collaborative piece of work. The second piece of research looks at the efficacy of the U.S. small business set-aside program. It's work that we have also undertaken.

To establish the context for the first study, let me briefly explain the study methodology. Data were drawn from the 2014 survey on financing and growth of small and medium enterprises, a survey conducted by ISED and StatsCan. It reflects the responses of over 10,000 SMEs with earnings of over $30,000 in 2014. In addition, the sample included a subpopulation of SMEs engaged in public procurement, that is, firms that had signed contracts with PSPC. I'll refer to SMEs known to have been suppliers to the federal government as “supplier SMEs”. The findings are representative of the small business population in Canada.

What did we learn? We learned that one in 10 SMEs had contracted with the federal government in the three years prior to the survey in 2014. We learned that SME suppliers are, on average, larger and older, and disproportionately concentrated in the knowledge- and technology-based sectors, and in construction.

In comparing supplier SMEs and all SMEs, we observed that supplier SMEs were more likely to report innovations, all types of innovation, including product, marketing, organizational, and process innovations. The most likely type of innovation was product innovation.

We learned that SME suppliers are export oriented. About a quarter of supplier SMEs conducted export activity, compared to merely 12% of all SMEs.

It might also be of interest to this committee that female-owned firms were less likely to contract with the federal government compared to male-owned firms. Among supplier SMEs, only 10% were primarily majority female-owned.

What are the reported challenges in doing business with the federal government? A key take-away was that the majority of Canadian SMEs, 82%, simply did not perceive the federal government to be a potential client. Even in those sectors in which SME suppliers are common, for example, knowledge-based industries, ICT, and construction, the government was still not seen as a potential client. For example, 75% of non-contracting SMEs in knowledge-based industries, sectors that are well represented in contracting opportunities, did not perceive the government as a potential client.

Other frequently cited reasons for not selling to the federal government were lack of awareness of contracting opportunities and the perception that the application process was too complicated or time-consuming. Among supplier SMEs, those firms contracting with the federal government, the primary obstacles were again associated with complexity of contracting, 43%; difficulties finding contracting opportunities, 26%; and the high cost of contracting, 27%. Other obstacles included long delays in receiving payment and difficultly meeting contracting requirements.

Interestingly, only 14% of supplier SMEs cited difficulties with respect to providing all services required in the contract. It may well be that supplier SMEs overcame the previously cited obstacles before delivering the services specified in the contract. Alternatively, delivering on federal contracts might not be as onerous or complex once the business has found the contract opportunity, responded to the RFP, and met the contract obligations.

These findings suggest that increasing the engagement of more SMEs in federal contracting requires communicating to SMEs that the federal government is open for business across all sectors. This study breaks down challenges of public procurement by stage of procurement, which is information that may inform other response strategies. A copy of the paper has been distributed through your office, and we have some here. It's available in English and French

Let me now summarize the findings of our study that examined the efficacy or impact of the U.S. women-owned business program, the federal contracting program, because I understand that this is a topic of interest to this committee. This is the U.S. Small Business Administration's supplier diversity initiative, a set-aside program that is intended to increase the diversity of federal contractors.

Again, to establish the context of study, the U.S. government has targeted 23% of its annual half-trillion-dollar spend to SMEs and 5% of its spend to women-owned firms. We examined the efficacy of various certifications, with particular reference to the set-aside for women-owned firms, on the frequency with which SMEs bid and succeeded in obtaining U.S. contracts. The population of interest comprised small businesses that were active bidders to the federal government, and specifically small businesses that were currently performing on a federal contract as a prime contractor.

In the U.S., vendors are required to be certified to qualify for the federal set-aside, for example, women-owned. Our study found that when we controlled for size and sector, that is, we compared apples and apples, the U.S. certification program had no impact on bid frequency or bid success. This is an important finding. It's a finding that suggests replication of the U.S. program is not in the best interests of Canadian business owners or taxpayers.

It is my view, however, that Canadian SMEs would benefit from a well-designed, regulated, and monitored federal supplier diversity program. This is for several reasons.

First, industry has sought such a program for over 20 years. For example, the 2003 prime minister's task force on women entrepreneurs and the 2011 national task force on women's business growth both recommended such programming.

Second, what the numbers do not speak to is that in Canada and the U.S. the agencies that certify minority-owned or women-owned business play a critical role in building capacity through conferences, networks, and fostering B2B relationships.

Third, the private sector has led the way in supplier diversity programs, programs that are creating more robust entrepreneurial ecosystems.

The U.S. set-aside also illustrates that the design and execution of such a program requires strict certification protocols, monitoring, and reporting. For example, it took the Small Business Administration 20 years to reach the 5% procurement target for women-owned businesses, a target that was achieved only in 2016, under the Obama administration.

The U.S. experience suggests that to enhance Canadian contracting opportunities for small businesses, PSPC executives must be held accountable, reporting on consequences for those agencies that do not meet designed targets.

Finally, a hallmark of effective entrepreneurial ecosystems is the engagement of entrepreneurs. A diversity of Canadian entrepreneurs across sectors, business models, and stages of procurement should be consulted on program design, execution, and monitoring. Such engagement will help to address a long-standing assertion that Canadian governments at all levels have been lethargic in employing procurement as a mechanism to support Canadian small and medium-sized enterprises.

Thank you.

December 12th, 2017 / 11:10 a.m.

Conservative

The Chair Conservative Tom Lukiwski

Thank you very much.

As is our custom, Professors, we will start now with a seven-minute round of questioning.

We'll begin with Madam Ratansi.

11:10 a.m.

Liberal

Yasmin Ratansi Liberal Don Valley East, ON

Thanks to both of you for being here.

I've read your Linkedin document and your Telfer report. As we were studying the SMEs and whether the SMEs are benefiting from government procurement, we wanted a gender lens on it as well. Your presentation really shines a light on how women are really not benefiting from it. According to the Conference Board of Canada, businesses owned by women and minority groups are a dynamic component of the Canadian economy, so we want them to participate and benefit.

Last week, we had here some innovative women entrepreneurs who are facing the same challenges. They could not access one bid, not in 50 times. They never got a single contract. When one sold her AI business to a man, the guy got it, so I want to talk to you about how.... You've used the word “visualization”. What sort of metrics is visualization? How will it help government make the procurement process more attuned to women so that women find it more applicable to them? You're saying that 82% don't think of government as a contractor.

Also, in your research, have you seen women, especially the innovative ones, using OSME or BCIP?

11:10 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Dr. Barbara Orser

Thank you for the questions. Certainly, there is a perception that majority female-owned firms in terms of the entrepreneurs are discouraged from applying for contract opportunities. This is evidenced in the two large-scale national initiatives I mentioned: the 2003 task force and the 2011 task force. That perception is real.

As for the data we have in Canada, we have very little data, and I think that's an important take-away for this committee as well. This is one of the first studies that looked at the procurement. We are working with PSPC to dig down into the data so we can do a more robust gender lens analysis and control for things such as size, sector, and age of firm, because these are important indicators of a firm's viability. But this perception remains.

In terms of bringing women into the program for standard contracting opportunities, to the best of my knowledge, there's been no reporting on the programs such as the BCIP. This is an early opportunity, because there's been, what, 200 firms, and that's not hard to dig through. We have no such reporting or monitoring of the profile of those firms in programs or in general procurement practices, and they're not being flagged at entry, so it's impossible to monitor them.

11:10 a.m.

Liberal

Yasmin Ratansi Liberal Don Valley East, ON

There are some metrics you are suggesting, and I guess I homed in on the word “visualize”, in how you visualize the engagement of women entrepreneurs in the Government of Canada innovative agenda. I'm wondering whether you had any thinking around what sorts of metrics the government could use to ensure that when it's measuring contracts, it measures to see that women are benefiting. That's number one.

Number two, in the short run, would it be beneficial if, for example, there was a large contract given out and in the RFP the government mandated that 5% or 10% of that contract should be subcontracted to women entrepreneurs? I would like your thoughts on it, please

11:10 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Dr. Barbara Orser

Thank you.

With respect to metrics, StatsCan, ironically, has some of the best metrics in the world when it comes to measuring the profile of women-owned firms, but this information is not currently captured in any kind of contract. Yet we do that in many other kinds of contracts, such as social science and humanities research; it's our business, right? You can declare that at the front end, and it's taken away from the contract at adjudication.

Certainly, gauging the profile of a founder is a start. StatsCan uses majority or equal ownership, so we have those good metrics that other nations are copying to gauge what the profile of the founder is. That's a first step.

Second, in looking at our sector profile, when we're heavying up on certain sectors, is there an opportunity to look at other spending opportunities in professional services, say, where we know that women are overrepresented, as opposed to construction, where we know they're under-represented? There is a bit of a systemic play as well where women aren't coming into the federal process.

Third, we're not sure about the awareness of federal opportunities. We know that it's low right across the board, but we'll be gauging that in more detail with the forthcoming research.

11:15 a.m.

Liberal

Yasmin Ratansi Liberal Don Valley East, ON

There are women entrepreneurship councils that are working. Are you aware of them? Would you be working with them? If we work in silos, we're not getting the collective synergy.

11:15 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

11:15 a.m.

Liberal

Yasmin Ratansi Liberal Don Valley East, ON

Have you been working with any of them? Some of them sit on the national supplier advisory committee.

11:15 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Dr. Barbara Orser

Yes. I know Mary Anderson. We work with WBE, WEConnect Canada, and WEConnect International as a friend of those organizations, periodically employing our students to take on research.

I'll share a piece of research we did for WEConnect International. This is the largest global certification group in the world for women entrepreneurs. What we found is that their private sector members were leaders in the advancement of women within corporate opportunities. What we see is that not only are they engaging in procurement diversity initiatives, but they're also walking the talk as corporate players. That kind of trickle-down effect is what we gauge with WEConnect.

11:15 a.m.

Liberal

Yasmin Ratansi Liberal Don Valley East, ON

Professor Riding, you're dying to say something.

11:15 a.m.

Dr. Allan Riding Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

No. I think Barbara is covering it very nicely.

11:15 a.m.

Voices

Oh, oh!

11:15 a.m.

Liberal

Yasmin Ratansi Liberal Don Valley East, ON

You were looking and saying, “I like these ideas.”

11:15 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Dr. Allan Riding

I think one of the issues we face that pertains to your question is, as Barbara mentioned, data. Collectively, I'm not aware of—and we've worked with our colleagues at PSPC—any data that really talks to the profile of subcontractors. We have these data that Barbara mentioned, which we collected at StatsCan after the fact and had the privilege of analyzing.

In terms of subcontractors, we have no information at all that I've seen that allows us to learn about the profile of subcontractors. Your question about requiring subcontractors to be diverse certainly poses the question: how do we go about measuring that? It goes back to your first question, absolutely.

11:15 a.m.

Conservative

The Chair Conservative Tom Lukiwski

Mr. McCauley.

11:15 a.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

Thank you for meeting with us today. I appreciate a lot of things you've said.

Your article in the Ottawa Business Journal, which is how we found you to be a witness today, talks a lot about the difficulty in procuring business with the government, the paperwork. We've heard that repeatedly from all the other witnesses. We've had indigenous businesses here that have been struggling with it, and women as well. It seems that it's across the board. All demographics have trouble dealing with the government in the RFP process, but your article quoted a few people who were saying that it's similar to dealing with any large company.

How much of this do you think is the issue of the complexity and the paperwork of our RFP process, and how much is perhaps the fact that the SMEs just don't have the resources to bid on an RFP that would be considered normal if you're bidding on a Fortune 500 company RFP?

What I want to get at is how much of it is solvable by cleaning up our RFP process, which is, when we talk to businesses, very clearly quite onerous and difficult, and how much of it is, “too bad, that's just the way the world is”?

11:15 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Dr. Barbara Orser

As a good academic, I'd say both.

11:15 a.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

Okay. I'll move on.

11:15 a.m.

Voices

Oh, oh!

11:15 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Dr. Barbara Orser

We know that in the U.S. the 25% commitment to SMEs has been met. We know that we are—

11:15 a.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

Can I interrupt? When you talk about that, have you looked at their procurement process? Is it as difficult as ours?

11:15 a.m.

Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual

Dr. Barbara Orser

It is onerous, but I think the commitment by the federal government to engage SMEs has impacted that—

11:15 a.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

How did they do that in the United States?